Has anyone been receiving offers to buy out their mineral rights in Converse County? In the past few months two different companies have sent us offers. We haven’t sold anything yet, but I’m wondering what others are doing.
I have had offers from about 6 different companies. When there is a well drilled on your minerals or close to your minerals, the buyers seem to know more than you do and the offers roll in. I have spoken with one person who accepted an offer, so at least in one case, there was real money behind the offer.
In my case, we looked at the offers and the potential cash flow, and realized we did not want to sell. In general, the offers started coming in before we realized how much we probably would be receiving from royalty payments. I think that is a normal approach for the companies to make an offer before the mineral owner realizes how much the minerals may be worth. There is no certainty in any of this. It could be the wells will fizzle out. So maybe it is best to sell. But our conclusion was not to sell because they are drilling more wells in the area and plan to drill even more.
Ask yourself, are your minerals in an active area? Are the oil companies drilling close to your minerals? Would your minerals be likely to participate in the next few years? If you don't know these answers, don't feel alone -- we didn't either. But we did a lot of research, talked to folks living in the area, talked to land men from the oil company and as we gathered more and more data, the picture because more clear. Where are the wells being drilled? Where are the gas pipelines being laid? Once we began to answer those questions, we realized why we were receiving offers to sell our minerals. When you reach that point, the decision becomes easier to make.
If you want or need money soon, you should look into the situation with your minerals carefully. The general rule seems to be, holding on to minerals is a good idea -- especially if they are in a active area. But everybody has a different situation and so selling all or part of your minerals may fit your needs. But understanding the potential value of your minerals is very important if you want to sell.
Good Luck!
John
Miss Riley:
I represent a company that is actively acquiring mineral rights throughout the Powder River Basin. The prices they are offering are, in my estimation, quite good or I wouldn't be representing them. As in all things to do with real estate, price is generally determined by "location, location, location," but my client has a broader and more long-term outlook for the region than most. They also have significant resources and can afford to wait for the market to come to them, or to take the tax deduction if it all turns out to be a bust. Would that I were so rich!
The current interest in the region stems from the exploitation of another Niobrara play. However, just as in Colorado, many companies are beginning to question the vast amounts of money they've invested in this particular formation and are divesting themselves of their leaseholds. Production has been extremely spotty, at best, but there have been a tantalizingly few exceptional producers that seems to keep the interest alive. It's really hard to say how this is all going to shake out. A recent article sent to me by my brother (a geologist who has spent 40 years specializing in the Powder River Basin) indicates that exploration funds may be drying up for the Niobrara, but quite honestly, there is just no way to know what the future holds for this area.
What I can tell you is that Chesapeake has been very active in the southern end of the county. So has Petro-Hunt, but it seems that early results have been a little discouraging, but not discouraging enough to get anybody to quit entirely. Drilling permits have been allowed to expire while some of these companies re-evaluate their strategies. The long and the short of it is that you could sell your mineral rights for $1,000 or more an acre only to find out later that they held a real gusher. Or you could turn a bona-fide offer down waiting for the big casino and never even get leased. There is just no way to know. A lot of people continue to bet on "closeology," the persistent belief that if someone has a producing well within 3 to five miles from their minerals that they're sitting on top of a goldmine. Nothing could be further from the truth. I did a study of Niobrara wells in Colorado and found that 49 times out of 50, offset wells drilled close to a killer producer were all dry holes. It's exasperating!
John's right. Only you can determine what your situation is and whether it makes sense to sell or not. No matter what you decide though, it will be a gamble. There's absolutely nothing certain in this business. If there was, we'd all be rich. Educate yourself as best you can and make your decision based on that knowledge and your financial needs. If there's anything I can do to help, please let me know. I'd be happy to share with you what information I have. If you decide you'd like to sell, we can discuss that as well. If not, perhaps I could direct you to someone who may be leasing in your area. In any case, I'll do what I can to help.
Thanks
Tom Coalson
(EDITED by ADMIN - Use the private message system for contact info)
1) In Converse County, there are currently over 600 permits for horizontal wells listed on the Wyoming Oil & Gas Commission web site. You can look at the list of permits yourself and see maps showing where the wells would be if drilled. A year ago, I think this number was under 300 permits. Some of the older permits expired and are no longer listed. Others have been drilled. Other older permits have been extended. My point: This sure doesn't look like a sign that exploration funds are drying up for the Powder River Basin. And if that was the case, why would so many companies be trying to buy these minerals.
2) If you talk to landowners, you will learn that the oil companies have spent a lot of money on seismic studies so they can find the best locations to drill. In some cases. there has been a 2nd round of seismic studies. These studies are very expensive but point to the areas in the county where the oil companies may spend money drilling. Talk to land owners in your area. Some will not want to share information but others will be friendly. This information can help you put together the information needed to understand why someone would want to pay $5,000 - $6,000 / acre for your minerals.
3) The BLM drilling Unit where we have minerals is small and so far only has a few wells. But most of these well locations are being set up to drill 4 - 6 wells from a base location. Earlier this month, I began to receive royalty payments from the 1st well ( we have a small participation). Already, Chesapeake has begun drilling 2 more wells -- one 1/4 mile West and one a 1/4 mile East of the original well. We didn't anticipate these two additional wells when we first received offers to purchase our minerals. Time from permit approval to well drilling was less than 60 days. Again we expect to have a small partial participation.
4) The wells in this our area are horizontal wells spanning 5-7,000 feet . We are now able to see the actual production figures from 3 of these wells on the Wyoming web site. The 2 production wills in this unit are ranging form 550 - 650 barrels per day during the 1st 2 months. I'm sure production will decline but if they keep drilling wells, there will be a lot of oil coming out of the ground. Well #3 is shut in awaiting a pipeline connection for the gas. But there is every reason to believe this will also be a good well.
5) Our minerals seem to be well located. We are lucky. But the buyers of minerals seemed to know we were well located & lucky long before we did. I don't know where the buyers get their info, but when offers at $5,000 - $6,000 per acre were being tossed around, I kept asking myself " What do they know that I don't know?" I'll never know the answer to that question, but after thinking about it I decided I needed to learn a lot more about the value of our minerals.
I suggest to anyone seriously considering an offer to buy your minerals that you do a lot of independent investigation. With the internet, you have access to information from many sources. The Wyoming Oil & Gas Commission web site is a great source of information. Talk to the oil company land man you leased with, talk to people on the ground in Wyoming including land owners and other mineral owners in your area. I think all this will help you may a decision that is good for you.
While Mr. Linden is correct in his assertion that some people, in some areas of Converse County have been offered multiple thousands of dollars per acre for purchasing their mineral rights, his question: "...why would so many companies be trying to buy these minerals," may have an answer simpler than one might suspect.
I was hired by a company to bid for them at a tax sale for mineral rights in a Colorado county year before last. During the course of that auction, over 300 parcels were auctioned off...all but a handful of them going to one man. No matter what the true market value of the minerals was, he would outbid anyone and everyone, no matter what the price. His interest came from the fact that two mid-size oil companies, and one large company (Shell), were active in the area. These companies were active for a little over a year. While there were a few successes, most of the area was a bust and these companies have, apparently, packed up their bags for the time being.
Now I'm sure their geologists are all scratching their heads and re-working all their data, and there may be future activity prior to the time the leases expire. Hard to say. The point of this story is that one man from Texas came to this northern Colorado town and spent hundreds of thousands of dollars on mineral rights that he had hoped to lease or sell to someone for a profit. As far as I know, he hasn't been able to lease (or sell) to anyone.
Whenever a "play" happens, all sorts of people move into the area: oil companies and operators of all sorts, brokers working for oil companies, brokers working on speculation, investment funds, mom and pop investment clubs...you name it. A feeding frenzy begins. First leases are going for $50 an acre. Then $100. Then $500,...$1,000...more. Sooner or later it hits a limit and only large companies like Chesapeake, EOG (Enron Oil & Gas), Whiting, Noble and a few others can afford to play. And they can afford to pay that kind of money because they have foreign investment money.
Without divulging my sources, I know of one firm who had been drilling in southern Converse County because part of the deal they made with a Chinese company to get access to large amounts of their capital was to drill a certain number of wells over a certain period of time. According to my source, they have not had a great deal of success. Most companies might just walk away, but this company has discontinued its acquisitions in this area. But they are contractually obliged to drill, so they continue to drill. Sooner or later, by sheer statistical numbers, they will have some decent producers along the way. The long and the short of it is that many of the permits Mr. Linden refers to are for wells that larger companies are obligated to drill since they took large amounts of foreign (mostly Chinese) investment money. If Mr. Linden will also notice, 600 permits will not equate to 600 wells being drilled. There are 1,700 rigs active in the continental U.S. today. Most of them are in North Dakota and Texas. More of these permits will expire than can ever actually get drilled. It's a simple mathematical function.
Now think about it for just a minute. Let's assume you own the mineral rights in one of these units that drills a dry hole. What do you think the value of your minerals will be then? Had you sold your mineral rights for $5,000, or even $1,000 an acre, you'd look like a genius, wouldn't you. By the same token, if you didn't sell and you had someone drill another Jake #1 on your mineral rights, you'd also look like a genius. But how do you know which choice to make? Or do you even make the choice at all?
No matter what you do, unless you have excellent, regionally-experienced, up-to-date geological advice, it's a gamble pure and simple.. Even then, it's high risk.The only thing that might make you feel any better is that most of the people in this business make the same gamble that you do. Mineral owners, landmen, brokers, oil companies...in the end, it's a really expensive roll of the dice.
Seismic? Many large companies, Chesapeake among them, shoot expensive 3-D seismic over the lands they've leased. It's just part of the cost of locating the "sweet spots" in a resource play. But even seismic isn't all it's cracked up to be. It's just one of the many tools in the arsenal of the explorationist. Many companies won't drill without it, but even then, seismic doesn't guarantee success.
In Colorado's northern D-J Basin, one seismic company shot 100's of thousands of acres of seismic...on pure speculation. They spent tens of millions of dollars collecting data that they then turned around and sold to oil companies active in the region that wanted data in one area or another. In resource plays, this is becoming more of a business model: let the seismic company expend all the up-front costs then buy the seismic you need at a later time.
It is important that you understand the way the business operates before you make any decisions regarding your mineral estate. Mr. Linden presents pieces of the overall picture, but it is by no means all and there is a great deal to know. I've been doing this for years and I'm always learning something new. Technologies change so fast these days that lands that were once valueless are now producing huge amounts of oil and gas. That technological advance will continue, long after my time, and may make those lands with very little oil exceptionally valuable sometime in the future.
I recommend finding a professional that you can trust to help you understand what you need to know before making any choice that might affect you adversely. I wish you all the best in getting the information you need to make an informed decision. Good luck!
Tom Coalson
This forum is about Converse County Wyoming and therefore the Powder River Basin. It isn't about Northern Colorado. Both are classified as Niobrara oil plays but I think we are trying to exchange meaningful information about what is happening in Converse County on this forum. Just because an oil company has stopped drilling in another basin, that information is not relevant to me. If they have stopped drilling in Converse County, that would be good info to know. I would then ask who, where and why?
In researching the background of the companies offering to buy our minerals, I found quit a few out of area firms. One caller was a nice man from Louisiana and after questioning, he admitted he knew very little about Wyoming minerals. Others were from Oklahoma and Texas and some had very recent store fronts in Douglas. It's very hard for me to put a lot of trust in what I hear from these sources since they have little knowledge about the Powder River Basin
The Chinese / Chesapeake relationship has been public since January 2011. As a mineral owner, I don't care why they are drilling the wells, I am interested in how successful the wells are. That information is not easy to get. But gradually, you can put together a picture which makes the local situation a bit more clear. What does it say on the WY Commission web site? Are there trucks going to the wells in your area to pick up oil? How many wells? Any idea how many trips per day? How busy is the storage location? How many rail cars are coming into and out of the area picking up oil? Where are they building roads? Where are they putting in gas pipelines? This kind of information helped me assess my minerals. I gathered as many facts as I could -- facts that were relevant to my minerals. At the end of the process, I learned more than I thought I would. It wasn't a super clear picture, but it was a much better picture than I had a few months earlier.
If the mineral owner doesn't know the value of the minerals being sold, how does the mineral owner know the price offered is fair? This is a genuine dilemma. I hope more and more Converse County mineral owners will post their experience so all can benefit. I believe that is the advantage of an open forum of this type. I think we can all benefit from more information about what is going on in the Powder River Basin. The BLM Exporitory Units including Smith Creek, York Ranch, Clausen Ranch, Combs Ranch, Linden, East York -- these units all seem to have significant activity. I'm sure there are many others I am not familiar with. Gradually, information about activity in these units is being posted on the Wyoming Commission web site. The more we learn, the easier these to sell or not to sell decisions will be to make.
Good Luck to All !
John Linden said:
This forum is about Converse County Wyoming and therefore the Powder River Basin. It isn't about Northern Colorado. Both are classified as Niobrara oil plays but I think we are trying to exchange meaningful information about what is happening in Converse County on this forum. Just because an oil company has stopped drilling in another basin, that information is not relevant to me. If they have stopped drilling in Converse County, that would be good info to know. I would then ask who, where and why?
In researching the background of the companies offering to buy our minerals, I found quit a few out of area firms. One caller was a nice man from Louisiana and after questioning, he admitted he knew very little about Wyoming minerals. Others were from Oklahoma and Texas and some had very recent store fronts in Douglas. It's very hard for me to put a lot of trust in what I hear from these sources since they have little knowledge about the Powder River Basin
The Chinese / Chesapeake relationship has been public since January 2011. As a mineral owner, I don't care why they are drilling the wells, I am interested in how successful the wells are. That information is not easy to get. But gradually, you can put together a picture which makes the local situation a bit more clear. What does it say on the WY Commission web site? Are there trucks going to the wells in your area to pick up oil? How many wells? Any idea how many trips per day? How busy is the storage location? How many rail cars are coming into and out of the area picking up oil? Where are they building roads? Where are they putting in gas pipelines? This kind of information helped me assess my minerals. I gathered as many facts as I could -- facts that were relevant to my minerals. At the end of the process, I learned more than I thought I would. It wasn't a super clear picture, but it was a much better picture than I had a few months earlier.
If the mineral owner doesn't know the value of the minerals being sold, how does the mineral owner know the price offered is fair? This is a genuine dilemma. I hope more and more Converse County mineral owners will post their experience so all can benefit. I believe that is the advantage of an open forum of this type. I think we can all benefit from more information about what is going on in the Powder River Basin. The BLM Exporitory Units including Smith Creek, York Ranch, Clausen Ranch, Combs Ranch, Linden, East York -- these units all seem to have significant activity. I'm sure there are many others I am not familiar with. Gradually, information about activity in these units is being posted on the Wyoming Commission web site. The more we learn, the easier these to sell or not to sell decisions will be to make.
Good Luck to All !
Thanks to both of you, John and Tom, very interesting positions.
John, I would be interested in communicating directly with you if that works for you. Your situation and mineral location seems to be closest to my situation. I've been reviewing the Wyoming Oil and Gas Conservation site. Although I'm not an expert in interpreting the information, there are multiple wells in two of our areas. Two are listed as confidential since July 2012 and seven are listed as exploratory since early this year. I am planning on visiting the area in late July and would like to discuss the most efficient ways to use my time....who to talk with, how to get some of the questions you posed answered. I would be happy to call you. My email is cindy_riley@mentor.com
Thanks,
Cindy
Lucinda Riley said:
John Linden said:This forum is about Converse County Wyoming and therefore the Powder River Basin. It isn't about Northern Colorado. Both are classified as Niobrara oil plays but I think we are trying to exchange meaningful information about what is happening in Converse County on this forum. Just because an oil company has stopped drilling in another basin, that information is not relevant to me. If they have stopped drilling in Converse County, that would be good info to know. I would then ask who, where and why?
In researching the background of the companies offering to buy our minerals, I found quit a few out of area firms. One caller was a nice man from Louisiana and after questioning, he admitted he knew very little about Wyoming minerals. Others were from Oklahoma and Texas and some had very recent store fronts in Douglas. It's very hard for me to put a lot of trust in what I hear from these sources since they have little knowledge about the Powder River Basin
The Chinese / Chesapeake relationship has been public since January 2011. As a mineral owner, I don't care why they are drilling the wells, I am interested in how successful the wells are. That information is not easy to get. But gradually, you can put together a picture which makes the local situation a bit more clear. What does it say on the WY Commission web site? Are there trucks going to the wells in your area to pick up oil? How many wells? Any idea how many trips per day? How busy is the storage location? How many rail cars are coming into and out of the area picking up oil? Where are they building roads? Where are they putting in gas pipelines? This kind of information helped me assess my minerals. I gathered as many facts as I could -- facts that were relevant to my minerals. At the end of the process, I learned more than I thought I would. It wasn't a super clear picture, but it was a much better picture than I had a few months earlier.
If the mineral owner doesn't know the value of the minerals being sold, how does the mineral owner know the price offered is fair? This is a genuine dilemma. I hope more and more Converse County mineral owners will post their experience so all can benefit. I believe that is the advantage of an open forum of this type. I think we can all benefit from more information about what is going on in the Powder River Basin. The BLM Exporitory Units including Smith Creek, York Ranch, Clausen Ranch, Combs Ranch, Linden, East York -- these units all seem to have significant activity. I'm sure there are many others I am not familiar with. Gradually, information about activity in these units is being posted on the Wyoming Commission web site. The more we learn, the easier these to sell or not to sell decisions will be to make.
Good Luck to All !
Thanks to both of you, John and Tom, very interesting positions.
John, I would be interested in communicating directly with you if that works for you. Your situation and mineral location seems to be closest to my situation. I've been reviewing the Wyoming Oil and Gas Conservation site. Although I'm not an expert in interpreting the information, there are multiple wells in two of our areas. Two are listed as confidential since July 2012 and seven are listed as exploratory since early this year. I am planning on visiting the area in late July and would like to discuss the most efficient ways to use my time....who to talk with, how to get some of the questions you posed answered. I would be happy to call you. My email is cindy_riley@mentor.com
Thanks,
Cindy
I wish you all the very best.
Farewell,
Tom Coalson
I have a Eleventh Commandment "Thou Shall Not Sell Thy Mineral Rights"
I have been receiving offers to lease or sell the Mineral Rights on 534.49 acres in Town 32 North Range 71, and Range 71 Town 32. I have not done anything, but would like to talk to anyone who has holding near my area.
I participate in producing wells in 32 70 and 32 71, part of the Smith Creek Deep Unit. One months pay out will top any offer that you might ever receive...keep your minerals.
Cheers
I have received 3 offers to sell, and I belive all three of them are from "Flippers" by Flippers I mean some one who tries to figure out where the next big polay will be, then they try to get in and lease land for a low figure and when things open up they will flip your lease to one of the biggies. Just my humble opinion
Warren Alexander said:
I have received 3 offers to sell, and I belive all three of them are from "Flippers" by Flippers I mean some one who tries to figure out where the next big polay will be, then they try to get in and lease land for a low figure and when things open up they will flip your lease to one of the biggies. Just my humble opinion
Yes Sir, I had an offer of $ 1,000,000.00 for the mineral rights l have in Converse County.My lawyer, and my land man told me to get away from this guy as fast as I could. Not to sign anything with this guy, and burn any papers I had from him, Pronto.He ( the bidder) is from a company in Oklahoma City and Dallas. Seems my lawyer has seen the papers from this guy before, and he had a clause or two in there so that he would never have to pay me.You know my Dad used to say everyone hates lawyers till they need one.But it sure proved to me, that having a good Lawyer, and land man in your corner is sure worth while..
I have an 11th Commandment "Thou Shall Not Sell Thy Mineral Rights"!
Do not sell them. My last bonus check was $2000 an acre and 25% Royalties Gross at the well head.
we are looking to buy ....you can reach me at 918-633-3525
John…what specifics can you give me about progress in the Smith Creek area? How can I learn more about progress on minerals I own there? Thanks!
John P. Giehm said:
I participate in producing wells in 32 70 and 32 71, part of the Smith Creek Deep Unit. One months pay out will top any offer that you might ever receive…keep your minerals.
Cheers
Smith Creek (Deep) Unit – my family has received an offer on minerals for $5000/per acre. I have read posts of activity in the Smith Creek area dating back to June 2013. Are there other mineral rights owners who can share knowledge of present activity in the Smith Creek area? It seems like something very positive is happening in this area. There are apparently no permits for wells, yet we’re getting sizable offers to purchase.
One tip I read said great expense has gone toward duplicate seismic research. Land managers surely are privy to such kinds of information that allows them to make appropriate and wise offers to mineral owners. Most land management companies communicate they are merely speculating. I suspect they know something we don’t. It makes me more excited to hold on to the rights tighter and learn more about progress. Can you share more about what you know? Thanks in advance!!! – Shawn
John…here is my mineral location: Section 9-32N-70W: S/2N/2, N/2S/2 Regards, Shawn
Shawn Sturm said:
John...what specifics can you give me about progress in the Smith Creek area? How can I learn more about progress on minerals I own there? Thanks!
John P. Giehm said:I participate in producing wells in 32 70 and 32 71, part of the Smith Creek Deep Unit. One months pay out will top any offer that you might ever receive...keep your minerals.
Cheers